Motor insurance is necessary to drive a vehicle on road. These ridiculous auto insurance myths about road accidents will definitely surprise you.
When driving an automobile on road, you may encounter major to minor form unexpected losses. These losses may arise due to unexpected events such as theft, vandalism, or even road accidents.
Although, the probability of car accidents in industrialized nations has decreased but still it may occur every now & then. The decrease in road accidents is due to installation & adoption of higher safety standards.
According to auto industry statistics, an average driver may experience a ‘near accident’ condition every month. He/she is very much likely to be involved in an accident every 6 years.
Therefore, it’s significant to buy a right car insurance policy before you drive it on roads. Your policy should cover your all financial losses arising due to costly medical treatments.
But, there are several motor insurance myths that are prevalent in market to misguide you. You should make sure to understand them to avoid being trapped in wrong policy. Here are 10 ridiculous motor insurance misconceptions about road accidents:
(1) Your Insurer Will Pay Off Your Auto Loan If Your Car Is Totaled
It is one of the most surprising & ridiculous auto insurance myths about road accidents. Who will pay an automobile loan after an accident? This question arises mostly in the minds of policy owner.
People often believe that insurer will cover your losses by paying off your loan completely. But, actually your insurer will pay you only the fair market value of your car.
This fair value is equivalent to original cost of your car minus depreciation. Sometimes, this amount is less than balance of your car loan.
In such a case, owner of the car will be responsible for the outstanding loan amount or lease.
For example, suppose you bought a car for $24,000 & it is a case of total loss due to an accident. Now, you owe $20,000 on your loan. But, fair market value of your car is $16,500 only. Now, your insurer will only pay the current value of car i.e. $16,500. And, you will be responsible for outstanding loan of $2,500.
However, you can purchase Gap insurance coverage for your car. This policy will cover the difference between the fair market value of car & outstanding loan amount.
Image Source: Shutterstock